Business Entities in Nigeria: Types, Examples & Legal Structure

Introduction

Business entities in Nigeria define how businesses are legally structured, taxed, and regulated under Nigerian law. Choosing the right business entity is not just a legal requirement; in fact, it determines your liability exposure, tax obligations, ability to raise capital, and long-term growth potential.

Under the Companies and Allied Matters Act (CAMA) 2020, all businesses, whether a sole proprietorship, partnership, company, or nonprofit, every business entity must complete business registration in Nigeria with the Corporate Affairs Commission (CAC) before they can operate legally.

Therefore, understanding business entities in Nigeria is essential for entrepreneurs, startups, foreign investors, and nonprofit organizations seeking legal compliance and sustainable growth.

In this guide, you’ll learn the types of business entities in Nigeria, their structures, legal implications, examples, and how to choose the best entity for your business goals.

What Is a Business Entity in Nigeria? (Legal Meaning & Purpose)

A business entity in Nigeria is a legally recognized structure registered with the Corporate Affairs Commission (CAC) that defines ownership, liability, taxation, and regulatory obligations.

In addition, while all companies are business entities, not all business entities are companies. For example, a sole proprietorship or partnership is a business entity but not a company, whereas a Private Limited Company (Ltd) is both a business entity and a registered company.

Choosing the right structure is crucial because it affects taxation, ownership, investor confidence, and even your ability to expand internationally.

Types of Business Entities in Nigeria Under CAMA 2020

The types of business entities in Nigeria are clearly defined under the Companies and Allied Matters Act (CAMA) 2020 and determine how businesses are registered, taxed, and governed.

Under the Companies and Allied Matters Act (CAMA), the recognized types of companies in Nigeria include private companies limited by shares, public companies, companies limited by guarantee, and unlimited companies. These can be broadly categorized into three main types, each with sub-categories.

Sole Proprietorship	Small businesses	Unlimited	CAC
Partnership	Professionals	Unlimited	CAC
Private Ltd Company	Startups & SMEs	Limited	CAC
Public Company	Large corporations	Limited	CAC & SEC
Incorporated Trustees	NGOs & Associations	Limited	CAC

1. Business Name

The sole proprietorship and partnership fall under the “Business Name” registration. This is the simplest and most common form of business for small-scale entrepreneurs and professionals.

Sole Proprietorship: This is a business owned and managed by a single individual. The owner and the business are not legally distinct.

• Structure: The owner has full control and is solely responsible for all decisions, profits, and losses.
• Liability: The owner has unlimited personal liability. This means their personal assets (like their home or car) can be used to settle business debts.
• Example: A freelance graphic designer, a roadside shop owner, or a single-person consultancy firm.

However, among the various business entities in Nigeria, business name registration remains the most affordable option for small-scale entrepreneurs.

Partnership: A business owned by two or more individuals who agree to share profits and losses. Partnerships are governed by a partnership agreement.

• Structure: All partners are involved in the management and decision-making process.
• Liability: In a general partnership, all partners have unlimited liability.
• Example: A law firm, a medical practice, or a small accounting firm with multiple partners.

2. Companies

By contrast, companies are incorporated as separate legal entities from their owners, offering limited liability protection. The CAMA 2020 recognizes several types of companies.

Private Limited Company (Ltd): As one of the most common types of companies in Nigeria, private limited companies are ideal for startups and growing businesses

• Structure: It has between 1 and 50 shareholders. The company’s name must end with “Limited” or “Ltd.”
• Liability: The liability of the shareholders is limited to their unpaid shares. This protects their personal assets from business debts.
• Example: Most startups and tech companies in Nigeria, like a software development company or an e-commerce platform.

Public Limited Company (Plc): This is a larger, more complex structure that can raise capital from the public by selling shares on the Nigerian Stock Exchange (NGX)

• Structure: It must have a minimum of two shareholders and no maximum limit. The company’s name must end with “Public Limited Company” or “PLC.”
• Liability: Like a private limited company, shareholders have limited liability.
• Example: Large financial institutions like Guaranty Trust Bank (GTBank) PLC or manufacturing giants like Dangote Cement PLC.

Company Limited by Guarantee (Ltd/Gte): This structure is specifically for non-profit organizations.

• Structure: Members (called guarantors) agree to contribute a specific amount of money to the company’s assets in the event of its winding up. It does not have shareholders.
• Liability: Members’ liability is limited to the amount they have guaranteed.
• Example: NGOs, religious organizations, and foundations.

Unlimited Company (Ultd): This is a less common type of company where the members’ liability for the company’s debts is unlimited.

• Structure: Members are responsible for all the company’s debts without limit.
• Liability: Unlimited personal liability.
• Example: While rare, some family-owned businesses might choose this structure.

3. Incorporated Trustees

Incorporated trustees are a unique category of business entities in Nigeria, designed specifically for nonprofit, religious, and social organizations.

• Structure: Managed by a board of trustees, who are appointed to oversee the organization’s activities and assets.
• Liability: The trustees are not personally liable for the organization’s debts, as the entity is a separate legal body.
• Example: A community development foundation or a church.

This guide reflects current provisions under the Companies and Allied Matters Act (CAMA) 2020 and CAC regulations as applicable in 2026.

Comparison of Business Entities in Nigeria (Legal Structure & Taxation)

Entity Type	Key Features	Minimum Shareholders/Members	Minimum Share Capital	Taxation	Example / Use Case
Business Name (BN)	Simple, affordable, owned by an individual or partners.  No legal separation between owner and business	1 (Sole Proprietor)	Not required	Personal Income Tax (PIT) under PAYE or self-assessment	Ade & Sons Enterprises (Fashion Retail)
Partnership	Two or more people share ownership, profits, and liabilities.  Common among professionals	2 – 20	Not required	Partners taxed under Personal Income Tax (not corporate tax)	Joint law practice by two lawyers
Private Company Limited by Shares (Ltd)	Owners’ liability limited to shares.  Cannot invite the public to buy shares	2 – 50	₦100,000 (CAMA 2020 minimum issued share capital)	Corporate Income Tax (CIT), Withholding Tax, VAT where applicable	XYZ Tech Ltd (Tech Startup)
Public Company Limited by Shares (Plc)	Can raise funds from the public by offering shares.  Subject to stricter regulations	2 – unlimited	₦2,000,000 (CAMA 2020 minimum issued share capital)	Corporate Income Tax, Education Tax, Withholding Tax, VAT	Dangote Cement Plc
Company Limited by Guarantee (Ltd/Gte)	Used for non-profits, NGOs, or foundations. No shareholders, only guarantors	Minimum 2 members / guarantors	₦100,000 (guarantee sum, not share capital)	Exempt from CIT if registered as NGO; taxed if engaged in profit-making activities	Education or health-focused NGO
Unlimited Company	Members have unlimited liability.  Rarely used in Nigeria	At least 2	₦100,000	Corporate Income Tax and other applicable levies	Special financial arrangements
Incorporated Trustees	For associations, religious bodies, cultural or social groups. Managed by trustees	Minimum 2 trustees	Not required	Exempt from CIT (non-profit), but liable for PAYE on staff salaries	Churches, mosques, clubs, associations

Best Business Entities for Foreign-Owned Businesses in Nigeria

Foreign individuals and companies looking to operate in Nigeria must choose business entities that comply with Nigerian investment and company laws. While several structures exist, not all business entities in Nigeria are suitable for foreign ownership.

Recommended entities for foreign investors include:

• Private Company Limited by Shares (Ltd):
  This is the most common and practical structure for foreign-owned businesses in Nigeria. It allows full or partial foreign ownership, offers limited liability, and provides flexibility for startups and expanding companies.
  Foreign investors must meet additional regulatory requirements when registering a foreign-owned business in Nigeria, including sector-specific approvals where applicable.
• Public Company Limited by Shares (Plc):
  Suitable for large-scale investments and multinational corporations seeking to raise capital locally. While less common for initial entry, it provides access to public funding and enhanced credibility.
• Joint Venture Companies:
  Foreign investors may partner with Nigerian individuals or entities to form a jointly owned private limited company. This structure is often used in regulated industries or sectors requiring local participation.

Therefore, for compliance, foreign-owned companies may also need registration with relevant investment and regulatory bodies in addition to the Corporate Affairs Commission (CAC).

The Impact of the CAMA 2020 on Business Entities in Nigeria

The Companies and Allied Matters Act (CAMA) 2020 brought about a significant overhaul of Nigeria’s corporate law, aimed at enhancing the ease of doing business. Some of the most notable changes that affect business entities include:

1. Introduction of Single-Member Companies

CAMA 2020 now permits a private limited company to be formed by just one person. This marks a huge shift from the old rule that required at least two shareholders, opening the door for solo entrepreneurs to enjoy the protection and benefits of limited liability status.

2. Shift from Authorized to Minimum Issued Share Capital

The outdated concept of “Authorized Share Capital” has been replaced with Minimum Issued Share Capital. This requires companies to issue their entire minimum share capital at the point of incorporation—₦100,000 for private companies and ₦2,000,000 for public companies, removing the option of holding unissued shares for later.

3. Relief for Small Companies: No Mandatory Secretary

Under the new law, small companies are no longer compelled to appoint a company secretary. This reduces both administrative work and operational costs, offering flexibility to smaller businesses.

4. Digitalization: E-Filing and Virtual Meetings

CAMA 2020 embraces technology by allowing electronic submission of documents and recognizing virtual general meetings. This innovation makes compliance faster and far more convenient, especially for companies with shareholders in multiple locations.

5. Striking Off Dormant Companies

The CAC now has the authority to delist companies that fail to file annual returns over a defined period. This ensures a cleaner company register and encourages entities to remain compliant with regulatory obligations.

Pros and Cons of Business Entities in Nigeria

Each of the major business entities in Nigeria comes with distinct advantages and limitations that affect liability, taxation, and long-term growth.

BUSINESS ENTITY	PROS	CONS
Sole Proprietorship	Easiest and cheapest to register under CAC Full control and decision-making power rests with one person Minimal reporting and compliance requirements	Unlimited liability, personal assets are at risk Limited access to funding and investment Business continuity ends with the owner’s death or exit
Partnership	Combines expertise, skills, and resources of partners More capital available compared to a sole proprietorship Flexibility in structuring agreements (general or limited partnership)	Unlimited liability for partners (except limited partners) Disagreements can harm business operations. Profits must be shared among partners
Private Limited Company (Ltd)	Limited liability protects shareholders Easier access to funding from investors and banks Perpetual succession, the company continues even if owners change. High credibility with stakeholders	Higher cost of registration and compliance Must maintain proper books and file annual returns More regulated compared to smaller entities
Public Limited Company (Plc)	Ability to raise capital from the public through stock exchange Very high credibility and transparency Perpetual succession ensures stability	Heavy compliance and strict regulation by CAC, SEC, NSE Requires audited accounts and public disclosures Risk of hostile takeovers due to public shareholding
Incorporated Trustees / Limited by Guarantee	Best suited for charities, NGOs, and nonprofit initiatives Possible tax exemptions if approved by FIRS Builds trust with donors and international partners	Cannot distribute profits to members Heavily regulated in use of funds and reporting Requires approval from Attorney General for Ltd by Guarantee

Choosing the Right Business Entity

Choosing the right structure among the various business entities in Nigeria depends on your business goals, risk tolerance, funding needs, and compliance capacity.

• Liability protection: Companies and LLPs provide limited liability.
• Capital requirements: PLCs have high minimum capital thresholds.
• Management complexity: Sole proprietorships are simple; PLCs require structured governance.
• Tax implications: Different entities face varying tax compliance obligations.
• Regulatory compliance: New 2025 rules emphasize the importance of timely registration and filings.

frequently asked questions on business entities in Nigeria

Conclusion 

Understanding business entities in Nigeria is critical for anyone looking to start, expand, or formalize a business under Nigerian law. From sole proprietorships and partnerships to limited liability companies and nonprofits, each entity comes with unique benefits, risks, and compliance requirements.

The right choice depends on your business goals, funding needs, liability concerns, and long-term vision. While a sole proprietorship may be perfect for a small trader, a private limited company could be the gateway for startups aiming to attract investors, and a Plc may serve large corporations seeking to raise public capital. For charities and NGOs, incorporated trustees remain the trusted structure.

By carefully assessing your options and seeking professional guidance, you can choose an entity that not only ensures compliance but also sets your business on the path to sustainable success in Nigeria’s dynamic economy.

This article is provided for information purposes only and does not constitute legal advice. For more information or to seek further advice on the contents of this article, we invite you to contact us. We will be delighted to provide additional details and guidance. For further enquiries, kindly send us a message.

For enquiries on how to register a foreign company in Nigeria, contact: PUKKA Solicitors – +2348058344034 – info@pukkalogistics.com.ng